The natural food trend is taking grocery stores and bellies by storm. But it’s not just grocery stores where you can find evidence of this dietary shift. There are several natural food stocks taking the market by storm as well. While the S&P 500 is up 7.25% so far this year, several popular natural food stocks are outperforming the market significantly.
With the first three-quarters of 2014 behind us it seems like a logical time to check in on these natural foods companies. Here are the top three natural food stocks so far this year.
#1 Natural Food Stock of 2014: WhiteWave Foods (Nasdaq: WWAV)
Shares of WhiteWave foods are up 54.45% this year, good enough for the top spot on this list. The company is best known for its “Silk” and “Horizon Organic” family of products.
What you might not know is that the company was spun off of Dean Foods (NYSE: DF) back in 2012, a move designed to separate Dean’s faster-growing natural foods group from its core group of products. Since WhiteWave’s October 2012 initial public offering the stock is up around 108%, but it didn’t do much in its first nine months of trading. The stock is up 125% since July 2013 alone.
WhiteWave is being viewed as a potential acquisition target in the wake of news that General Mills (NYSE:GIS) buying Annie’s (NYSE: BNNY). The deal valued Annie’s at a PE ratio of 67.56.
If WhiteWave were to be purchased with the same valuation, the offer would be for $42.36 per share. That is a premium of around 20% from Friday’s closing price.
#2 Natural Food Stock of 2014: Chipotle Mexican Grill (NYSE: CMG)
No list of natural food stocks would be complete without mentioning Chipotle Mexican Grill. Sure enough, it earns the #2 spot for top performers so far in 2014.
With a year-to-date return of 24%, the stock seems to be maintaining its momentum nicely after rising 83% in 2013. Chipotle is often called “natural fast food,” but it actually falls into a category of restaurants called “fast-casual.” Chipotle competes more directly with companies like Panera (Nasdaq: PNRA) than McDonald’s (NYSE: MCD).
In an ironic twist of fate, McDonald’s was actually one of Chipotle’s original backers.
Today McDonald’s find itself struggling to maintain millennial customers who seem to love Chipotle. The trend has not only forced McDonald’s into more healthy product offerings but it is also forcing the fast-food giant to alter the layout and overall feel of its restaurants, favoring a more relaxed and “casual” feel over the “fast” feel.
My colleague Chris Preston wrote a piece a couple weeks ago about Chipotle, highlighting its powerful combination of revenue growth and earnings growth.
#3 Natural Food Stock of 2014: SunOpta, Inc (Nasdaq: STKL)
SunOpta’s products sell under brand names including “Sunrich Naturals” and “Nature’s Finest.” I didn’t think I had heard of them until I went looking for those labels at a nearby natural foods store.
The company is up 19.18% so far this year and trades at a PE of 47.71. Though this is significantly higher than the average PE of S&P 500 stocks – currently 19.66 – it’s actually pretty reasonable among the natural food stocks cohort.
Consider that Annie’s was purchased at a PE of 67.56 and that WhiteWave currently trades at a PE of 56.51. Chipotle also trades at a higher valuation, ringing in at 58.26.
Given how much consumer and media attention the natural food trend is receiving it’s really no surprise that these stocks are a favorite among investors. But with valuations so far above the rest of the market, be weary of how a market correction could affect this group.
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